Nigeria, renowned for her vast reserves of mineral wealth finds itself at a crossroads as it grapples with the policy measures aimed at revitalizing the underperforming mining sector. Consequently, the Nigerian mining sector has long been seen as a potential powerhouse for economic growth and development.
The proposed Solid Minerals Corporation represents a strategic move towards diversifying Nigeria’s revenue stream and positioning the country as a major exporter of vital solid resources
Recently, the Minister of Mining and Solid Minerals, introduced the Transformation Agenda, which includes the establishment of the Nigerian Solid Minerals Corporation. This corporation is intended to oversee the operations of mining and exploration activities in Nigeria. It is a state-backed initiative aimed towards attracting significant foreign direct investments and forming partnerships with international miners for the extraction of gold, coal, iron ore, bitumen, lead, limestone, and barite, with the promise of unlocking the potential of Nigeria’s mineral resources and diversifying the economy. This move begs the questions: Can this proposed solid minerals corporation be the solution to the mining sector’s issues? Can Nigeria leverage this proposed solid mineral corporation to attract foreign earnings amid the scarcity of FX, seeing that the country heavily relies on the proceeds of crude oil to earn FX – which, consequently, affects the strength of the Naira?
Read also: Explainer: 10 things to know about Nigeria’s solid minerals roadmap
Over the years, the mining sector has encountered various challenges that have stymied its growth. First and foremost, the sector wrestles with illegal mining activities, which not only deprive the nation of much-needed revenue and FX, but also exacerbate environmental degradation and social conflicts. Secondly, there is a shortage of infrastructure and modern technology, hindering the exploration and extraction of valuable minerals. Lastly, bureaucratic red tape and inconsistent policies have deterred both local and foreign investors from actively participating in the sector, resulting in untapped potential and revenue losses.
Read also: Why Nigeria’s solid minerals sector is crawling
Despite the hurdles, the proposed Solid Minerals Corporation holds promise as a solution to the mining sector’s challenges. On the positive side, it aims to attract Foreign Direct Investment (FDI) by creating a conducive environment for investors, fostering economic growth, and providing job opportunities. On the negative side, establishing the Solid Minerals Corporation in Nigeria, may introduce added bureaucracy and potential corruption risks. As such, statistics regarding the sector’s growth, revealed that the solid minerals sector contributed a noteworthy N193.59 billion in revenues in 2021 alone, and a cumulative revenue contribution of N814.59 billion between 2007 and 2021, according to a report from Nigeria Extractive Industries Transparency Initiative (NEITI). Nigeria boasts of 44 different types of commercially viable minerals, estimated to be worth a staggering $700 billion as per the Solid Minerals Development Fund (SMDF), with gold, coal, iron ore, bitumen, lead, limestone, and barite, representing just the tip of the iceberg.
Read also: Nigeria generated N814.59bn from solid minerals in 15 years — NEITI
The proposed Solid Minerals Corporation represents a strategic move towards diversifying Nigeria’s revenue stream and positioning the country as a major exporter of vital solid resources. Taking Australia, the world’s largest exporter of lithium, as a case study, Nigeria can draw inspiration and position itself as a major exporter of vital solid resources. Lithium is a highly sought-after resource essential for energy companies like Tesla, making it a valuable commodity in the global market. However, while the establishment of a state-owned mining sector, the Nigerian Solid Minerals Corporation, holds significant importance to the growth of the Nigerian economy, it is crucial for the government to proceed with caution. This is necessary because investors and industry operators often view such initiatives with skepticism due to concerns about potential nationalization, as seen in the case of South Africa. Thus, learning from South Africa’s experience provides a valuable insight into how Nigeria should approach this endeavour.
Nigerian Solid Minerals Corporation as solution to mining sector issues
Over the last 8 years, spanning from 2013 to 2021, a comparison of the revenue generated by Nigeria from oil and solid minerals reveals a dynamic landscape influenced by factors such as oil prices, production levels, and mineral market conditions. Historically, Nigeria being one of Africa’s largest oil producers and exporters, has consistently relied significantly on revenue from crude oil.
Read also: Under Alake, Nigeria’s solid minerals sector gets a makeover
Consequently, the fiscal health of Nigeria has been intricately tied to the volatile fluctuations in global oil prices. In 2013, for instance, oil prices were relatively high, averaging around $109 per barrel of Brent crude oil, resulting in substantial revenue from oil.
The subsequent years witnessed significant volatility in oil prices, with prices dipping in 2014, 2015, and 2016 due to oversupply and weakened global demand, leading to a decline in Nigeria’s oil revenue. Although there was a partial recovery in oil prices in 2017 and 2018, volatility persisted, affecting Nigeria’s revenue during these years. In 2019, oil prices stabilized somewhat, but the outbreak of the COVID-19 pandemic in 2020 triggered a sharp decline in oil prices and revenue due to plummeting global demand. In 2021, oil prices began to recover, but they remained below pre-pandemic levels, presenting ongoing challenges to Nigeria’s oil revenue. In 2022, global oil prices surged higher amid the Russian war in Ukraine and supply chain disruptions affected the global economy coupled with OPEC and OPEC + cuts in supply of crude oil.
On the other hand, revenue from solid minerals has historically been relatively modest compared to oil revenue; thus, it offers stability and growth potential. Nigeria boasts of significant solid mineral resources, including gold, lead, zinc, tin, and iron ore. Recent years have seen concerted efforts to revitalize the solid minerals sector, including policy reforms and initiatives aimed at attracting private sector investment. While solid minerals revenue may not have matched oil revenue during the past 8 years, it has the potential to provide a more stable and diversified income stream. This comparison underscores the vital importance and feasibility of diversifying Nigeria’s revenue sources by developing the solid minerals sector. Sole reliance on oil revenue leaves the country exposed to the volatility of global oil prices, as evidenced by the significant price fluctuations over the years. Though solid minerals revenue may initially be lower than oil revenue, it offers stability and the potential for long-term growth especially along the value chain when fully developed and optimized. Moreover, it reduces Nigeria’s vulnerability to the unpredictable dynamics of the oil market.
Considering the revenue data and the challenges associated with oil dependency, diversifying into the solid minerals sector becomes imperative for Nigeria’s economic stability and long-term sustainability. This time, it is different from previous proposals because Nigeria is actively considering diversification. The President is actively pursuing Foreign Direct Investment (FDI) to boost the economy and make Nigeria an attractive destination for investors after years of decline. Thus, the changing economic landscape and commitment from the government underscore the timeliness and necessity of the Solid Minerals Corporation, with the cornerstone of its feasibility lying in Nigeria’s remarkable endowment of mineral resources.
Unlocking Nigeria’s mining potential and policy recommendation
The feasibility of the Nigerian Solid Minerals Corporation as a solution to the mining sector’s issues, hinges on its ability to combat illegal mining activities and improve resource management. The use of satellite geo-mapping tools is imperative in this regard. These tools enable precise resource identification and tracking, promoting transparency and accountability in the sector. Additionally, such measures align with Nigeria’s efforts to reduce carbon emissions, signalling a commitment to environmentally sustainable practices. Amidst these efforts, careful planning and implementation are essential to ensure that the corporation achieves its objectives without causing undue concern among investors and industry stakeholders. If executed effectively, the Nigerian Solid Minerals Corporation has the potential to be the long-awaited solution to the mining sector’s persistent challenges, driving economic growth and diversification in Nigeria.
Prof. Nnanna, chief economist, Development Bank of Nigeria
Note: The views expressed herein are those of the author and not necessarily those of the Development Bank of Nigeria.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
